Introduction

The time has come for corporate clients to seriously consider what the long awaited, but now active, Competition Policy Review means for them and whether they should participate.

The Competition Policy Review, dubbed the ‘Harper Review’ after its chair Professor Ian Harper of the Melbourne Business School, is now well and truly underway. The four member Review Panel1 has released a 50 page Issues Paper, made a call for submissions (by 10 June 2014), and indicated that it will shortly commence detailed consultation forums.

The Review’s indicative timeline suggests an intense process aimed at producing a report in early 2015.2

Click here to view timeline.

What we can confidently expect, even so early in the process, is that the Review will almost certainly recommend changes to the substantive law which, if implemented, will add to the competition regulatory maze that governs corporate conduct.

How can we say this? There are a number of reasons:

  • the terms of reference for the Harper Review are extraordinarily wide-ranging (we reported on the draft Terms of Reference here - these are largely unchanged in the final Terms of Reference, but for the inclusion of an Overview Section),
  • there is a view both in the Government and in the wider community that our competition law needs to be ‘improved’, and
  • the history of legislative change in Australia, especially in areas affecting business, shows that ‘improvement’ inevitably means new laws, more words, and less certainty.

That said, the Review presents a real opportunity to ensure that economic rigour and commercial rationality pervade both the analysis and the outcome. That opportunity is enhanced where corporations actively participate in the process to ensure that their perspectives are included.

We recommend that clients decide early what approach they will adopt towards participating in the Harper Review and trying to influence the outcome.

The Herbert Smith Freehills Competition team has the legal and policy knowledge, experience, and track record to guide clients through the submission and public hearing processes involved in the Harper Review.

The terms of reference

An effective competition framework is a vital element of a strong economy that drives continued growth in productivity and living standards. It promotes a strong and innovative business sector and better outcomes for consumers.3

The terms of reference announced for the Harper Review do not differ greatly from the draft leaked before Christmas. The only substantive change to the early draft is the inclusion of an Overview section, including a reference to examining the ‘special protections’ for small business in the current law.

It is fair to say that very little will be out of bounds.

The Panel describes the Terms of Reference as ‘deliberately wide’. It is important to recognise that the review is called not merely to examine the drafting of the legislation. Rather this is very much a review of both policy and the law.

With reference to the 1993 National Competition Policy Review (the Hilmer Review), the Panel sees itself as ‘Hilmer Mark II’. It has therefore made clear that it will examine the broader competition framework as well as the competition policies and laws to evaluate whether they continue to be ‘fit for purpose’ in the context of Australia’s current and emerging economy.4

The only area expressly excluded from the Review is the Australian Consumer Law, but even here the unfair contract terms and unconscionable conduct rules as they affect small business are expressly included. Legislative change here has the potential to intrude into day to day transactions with SME suppliers and customers.

The areas that receive specific mention, but not so as to limit the overall scope of the review, are:

  • natural monopoly and access to services – embracing both section 46 misuse of market power and Part IIIA access regime,
  • ‘groceries, utilities and automotive fuel’ – the all too easy ‘hot buttons’ for competition law reforms, and
  • ‘parallel import restrictions and international price discrimination’ – which exposes industries like pharmaceuticals, software, video, music and books.

Numerous references to market power, ‘muscle’, and ‘big businesses’ on the one hand, and ‘small business’ on the other, suggest where a large part of the focus will be.

The Issues Paper – Panel’s guidance for making a submission

The overarching objective of this Review is to identify competition enhancing microeconomic reforms to drive ongoing productivity growth and improvements in the living standards of all Australians.5

The 50 page Issues Paper released on 14 April 2014 is intended to guide those making submissions to the Review. The questions set out in the Issues Paper are at two levels:

  • high level questions deal with the broad direction that the Review might take, and
  • more detailed questions deal with the many specific issues exposed by the broad Terms of Reference.

The 6 Chapters of the Issues Paper identify specific areas of potential interest in the Review.

Click here to see table.

Conclusion

Encouragingly, the Terms of Reference put on the table whether Australia’s ‘highly codified competition law’ is ‘responsive, effective and certain in its support of economic policy objectives’. It also raises the ‘need to minimise business compliance costs’ and provide ‘reasonable regulatory certainty’.

Whether this will translate into a less codified, more certain, and less burdensome regime is at best doubtful. 

The history of both major reviews and ad hoc reform of Australia’s competition law and policy points in the opposite direction, especially the 1993 Hilmer Review which is the express benchmark for the 2014 Harper Review.

This is not to deny the benefits that flowed from the most significant changes that resulted from the Hilmer Review. However, those benefits came not from tinkering with the competition provisions in Part IV of the legislation but from the changes in relation to government owned businesses, government regulation, and access to services.

Moreover, the real opportunity of the Review is to bring to competition policy and law reform a rigour that has been sadly lacking in some recent examples of actual and proposed reform.

How should clients approach the review?

Clients should be concerned about two consequences of the review.

The first is the risk of ill-considered changes to competition legislation. Some of the proposals for amendments have been mentioned above.

The second is less evident, namely the adverse publicity involved in a review process that invites public submissions and gives a platform for hot button issues in public hearings.

All businesses should consider how potential changes to competition law could adversely affect them and how best they can participate in the Harper Review with a view to ensuring any recommended changes are thoroughly examined and all the potential consequences fully understood.

The Harper review timetable will be quite compressed. Within the 12 months set by the Government for a final report, the panel will hold public hearings, publish a draft report and then a final report. It is unlikely there will be any room for a leisurely approach to participation.